Badge: Legislative History

Caption: Filipinas Life Assurance Company v. The Court of Tax Appeals and The
Commissioner of Internal Revenue, G.R. No. L-21258, October 31, 1967; Ponente – Castro

Syllabus: Ascertainment of legislative intent; Importance of legislative history of a statute

Facts:
 Petitioner filed an income tax return reporting total gross income of P62k
 It subsequently filed an amended return reporting total gross income of P20k,
accompanied with a claim for refund of P2.7k, due to the fact that in its amended return,
it only reported 25% of the dividends from domestic corporations
 The claim for refund was filed with respondent Commissioner on Internal Revenue but as
he has not been heard from, petitioner took the matter to the Court of Tax Appeals (CTA)
to avoid prescription
 CTA denied the claim for refund on the ground that the proviso allowing the return of
only 25% of the income from dividends is found in the subsection (A) of section 24 of
the NIRC, while life insurance companies are dealt with in another subsection, although
of the same section

Issue: Whether or not domestic and resident foreign life insurance companies are entitled to
return only 25% of their income from dividends under the 1957 amendment of the Section 24 of
the NIRC.

Ruling/Ratio: While proviso is deemed to apply only to the immediately preceding clause or
provision as a general rule of statutory construction, its position cannot override intention. Thus,
the position of a proviso, although possessed of considerable influence, is not necessarily
controlling, as the proviso may apply to sections or portions thereof which follows it or even to
the entire statute. In the ascertainment of intention, the legislative history of statute is extremely
more important than position. Following the legislative history of the statute, it will be thus seen
that dividend exclusion has always been a dominant feature of corporate income tax since a
corporation cannot deduct from its gross income the amount of dividends it distributed to its
corporation-shareholders during the taxable year, any distributed earnings are necessarily taxed
twice. A review of the circumstances which prompted the amendment of Section 24 in 1957
shows no intention to withdraw from life insurance companies the exemption which theretofore
had been enjoyed by them along with non-life insurance companies. The amendment was
intended for a two-fold purpose: change the tax base to investment income, and lower tax on life
insurance companies. Following this intention, the legislature could not have intended to
withdraw such privilege from them. Hence, it is held that domestic and resident foreign life
insurance companies are entitled to the benefits of dividend exclusion, the position of the proviso
allowing it notwithstanding.

Fallo: Accordingly, the decision appealed from is reversed, and the respondent Commissioner of
Internal Revenue is ordered to refund the petitioner company the amount of P2,721 as excess
income tax for 1958. No pronouncement as to costs.